ratio analysis

Question 1

profitability ratios

Answer 1

gross profit margin
net profit margin
ROCE
return on equity

Question 2

efficiency ratios

Answer 2

asset turnover
stock turnover
debtor days
creditor days

Question 3

liquidity ratios

Answer 3

current ratio
acid test
gearing
interest cover

Question 4

shareholder ratios

Answer 4

earnings per share
price earnings
dividend per share
dividend yield
dividend cover

Question 5

gross profit margin

Answer 5

gross profit / turnover x 100

for every £1 sales, how much GP do we keep

Question 6

net profit margin

Answer 6

net profit / turnover x 100

for every £1 of sales how much NP do we keep

Question 7

ROCE

Answer 7

operating profit (before tax and interest)
———————————————————
long term capital employed
(total equity + non current liabilities)

                             x100

Question 8

ROCE shows

Answer 8

how much money they get back from investment in capital

Question 9

return on equity

Answer 9

net profit / equity x100

Question 10

current ratio

Answer 10

current assets/current liabilities

Question 11

acid test ratio

Answer 11

current assets - stock / current liabilities

less than one bad
indicates liquidity problems

Question 12

gearing ratio

Answer 12

non current liabilities ——————————— x100
total equity + non-current
liabilities

50+ highly geared
20- low

Question 13

interest cover

Answer 13

operating profit / interest payable

how many times interest can be payed with pre tax profit